The Study On The Reinsurance Strategic Demand Of Chinese Property Insurance Companies

The study on the reinsurance of property insurance by domestic scholars includes both macro and micro levels while there is little study from the angle of insurance companies’ strategic demand. This paper attempts to conduct theoretical and empirical analysis of the strategic demand of property insurance companies, hoping to provide some theoretical and empirical support to the development of the reinsurance market of property insurance.Firstly, we analyze the status quo of the reinsurance demand of Chinese property insurance companies, based on which to propose the strategic demand of reinsurance: the demand to improve solvency, insurance capacity, internal balance and the management of catastrophe risk. Secondly, we design a corresponding model based on the definition of reinsurance strategic demand of Chinese insurance companies and conduct empirical study using the data from Chinese property insurance companies ranging from2006to2012. The result shows that:1) companies with lower solvency or insurance capacity have less reinsurance demand.2) the demand of internal balance through disperse insurance types is negatively correlated with reinsurance demand while that of regional dispersion is positively correlated with reinsurance demand.3) reinsurance demand is not significant to catastrophe insurance. The paper concludes that the factors that reduce reinsurance demand include shortage of capital and earnings, excessive dependence on underwriting profit, underdevelopment of investment, high concentration of insurance types, high regional dispersion and catastrophe losses being exclusions. In the end, the paper gives suggestions from the viewpoints of property insurance companies, reinsurance companies and regulators of reinsurance. For property insurance companies, we suggest the use of reinsurance to improve potential solvency, adjust the ratio of retention premiums and underwriting risk structure and promote the management of catastrophe risks. For reinsurance companies, we suggest the adjustment of reinsurance structure, innovation of reinsurance products, and enhancement of international competitiveness. For regulators, we suggest they should further clarify the regulating objectives, perfect reinsurance regime, reinforce the supervision of international insurers and pay attention to the regulation of new reinsurance businesses.